The internet has made the world smaller, and not just when it comes to cross-border information sharing and conversation. Manufacturers and retailers can market to potential customers all over the world. And shoppers are willing to purchase just about anything they find online, sometimes without even knowing its origin.
These global markets offer huge opportunity for online sellers. Customers are shopping globally, seeking out the best prices and specialty products they can’t find on local shelves, like Korean skincare and Italian leather. In 2013, it was estimated that 86,000 ships move 9 billion tons of cargo. That’s more than a ton for every person on the planet.
But in order to tap these markets, retailers need to be able to ship products internationally. That’s no small feat. International shipping isn’t cheap. It comes with the added challenges of customs and duties.
Plus, if customers don’t really think about where their products are coming from, they will expect similar experiences from local products and international ones — and if those shipped internationally don’t hold up, they’re not likely to become repeat customers.
Globalized shipping represents a huge business opportunity for those willing to assume the risks involved. Here’s how to conquer it.
The Benefits of International Shipping
Some benefits of shipping internationally are obvious. If you can ship products globally, that means you can sell products globally, enabling you to tap into dozens of new markets with millions of potential new customers.
That has some secondary effects. First, the more sales volume increases, the more production costs per item can come down. That can increase your margins — although, of course, the cost of international shipping will be higher than the cost of domestic shipping. Second, establishing your product in an international market can make it more challenging for a competitor in that country to establish itself, giving you a foothold that could pay dividends long into the future.
Potential Challenges of International Shipping
The first challenge of international shipping is the cost. Although many supply chains are globalized, and billions of tons of goods move across oceans every year, the vast majority of those shipments are raw or mid-level supply chain materials. Getting bulk pricing on finished products requires you to ship a huge number of units — more than your new market may be ready for.
Once those units get to your new market, you have to store them. Your company may need to build a fulfillment center in your new market, which can be an expensive and paperwork-heavy process, or lease space in an existing one, which adds operational costs.
Further, tracking capabilities vary widely across the world. U.S. companies that already have experience with DHL may find that company a good partner in Europe, because its tracking capabilities are similar to those of UPS and FedEx. But in other parts of the world, where shipping networks are less developed, supply chain leaders may grow uneasy with limited tracking capabilities — especially if customers there may be susceptible to scams or theft along the way.
Navigating the maze of customs, duties, fees and taxes can be arduous. The penalties for mistakes can be great, coming either in the form of expenses or long delays in shipments (or both). It may be wise to add a consultant to your team who specializes in these topics.
Finally, since the U.S. has become so used to two-day delivery, it can be difficult to adjust to long wait times for international shipping. Delays at customs are common in some countries. Delays along the way are even more common. Be careful as you communicate with your customers about their wait times, since so much of this is outside a shipper’s control.
How to Succeed in Cross-Border Shipping
Once you’ve identified a market that seems like a good expansion opportunity, begin researching. How long does it take to ship a package in that country, on average? How does tax and duty collection work? How much will duties add to your costs? Are you responsible for paying those, or can you pass them on to customers?
With that information, you can get a sense of how much an international expansion would cost. Weigh that against how much it could help grow your business. Is now the right time to expand?
Next, research your software options. Does your tracking software work in that country, and if not, what software options do you have? Do they offer insurance? Can they create shipping labels for international orders accurately? How will they handle returns, when customers inevitably want to send them?
If you feel ready to conquer globalized shipping, then finally, team up with experts. Experience is hugely helpful in navigating new markets, from understanding potential customers there to preparing for customs inspections to paying taxes. Don’t try to do this alone.